FE Investegate |Downing One VCT Plc Announcements

Downing ONE VCT plc : Half-yearly report

(formerly Downing Distribution VCT 1 plc)
Half-Yearly Report for the six months ended 30 September 2013 CHAIRMAN’S STATEMENT
As I am sure Shareholders are aware, there have been some major changes to your Company that have taken place recently. On 12 November, the Company completed a merger with five other VCTs and on 13 November 2013, changed its name from Downing Distribution VCT 1 plc to Downing ONE VCT plc. The Company’s shares also underwent a consolidation such that the New Ordinary Shares created had a net asset value of 100.0p per share based on investment valuations as at 8 November 2013.

Along with the merger, there have been a number of Board changes, including my appointment as Chairman.

I am therefore pleased to present my first report to Shareholders.

Reporting period
The Company is required to report on the six-month period ended 30 September 2013, however, as this period ended prior to the completion of the merger, we have also included an unaudited balance sheet and summary of the investment portfolio immediately following the merger (as at 12 November 2013) and much of the focus of this report will be on the Company since the merger and future plans.

Board changes
In structuring the merger of six VCTs, it was agreed that the merged entity should have representation on the post-merger board from each of the participating VCTs. Accordingly, Barry Dean, Andrew Griffiths, Helen Sinclair and I all joined the Board as non-executive directors on 12 November 2013.

In addition, Christopher Powell, Roger Jeynes and Michael Cunningham stepped down from the Board. I would like to thank each of them for their considerable contribution over the years that they were directors of Downing Distribution VCT 1 plc and wish them well for the future.

I also wish to thank all of the non-executive directors of the other participating VCTs who have not joined the Downing ONE board. I believe the merger has been a very positive development for all Shareholders and could not have taken place without a substantial amount of additional work from all directors of each of the participating VCTs.

Merger
The merger was undertaken on a relative net asset value basis using net asset values as at 8 November 2013.

The VCTs whose assets and liabilities were acquired by the Company (“DD1”) are summarised as follows:

Downing Absolute Income VCT 1 plc (“DAI1”); Downing Absolute Income VCT 2 plc (“DAI2”); Downing Income VCT plc (“DI”);
Downing Income VCT 3 plc (“DI3”); and
Downing Income VCT 4 plc (“DI4”).

The merger was undertaken by means of five schemes of reconstruction under Section 110 of the Insolvency Act 1986 and was followed by a share consolidation.

This resulted in New Ordinary Shares being issued to the various groups of shareholders as follows:

Original shares heldApproximate number
of New Ordinary
Shares issued for each
share originally heldDD10.713DI0.353DI3: Ordinary0.916DI3: E Share0.870DI40.387DAI1: Ordinary0.842DAI1: C Share0.705DAI2: Ordinary0.688DAI2: A Share0.001

Review of period to 30 September 2013
I will now turn to the period prior to the merger. As at 30 September 2013, the Company’s NAV stood at 69.2p; a small increase of 0.2p (or 0.3%) compared to 31 March 2013 and after taking into account the 2.5p dividend paid during the period.

In general, the Company’s AIM-quoted investments performed well over the period producing net unrealised gains of 676,000 and realised gains of 19,000.

Amongst the unquoted investments, one significant provision was required which contributed to net unrealised losses of 523,000 from the unquoted portfolio.

After the period end, the AIM-quoted investments continued to perform strongly, helping NAV increase by 2.1p to 71.3p at 8 November 2013, being the NAV which was used for the merger.

Post merger
As at 12 November 2013, the newly merged Company had net assets of 74.9 million and the NAV per New Ordinary Share was 100.4p, the increase of 0.4p arising from uplifts in the valuation of quoted investments between the 8 November and 12 November.

The Company now holds investments in more than 100 companies. In round numbers, approximately 60% of the Company’s net assets are invested in unquoted businesses, 35% in quoted companies and the remaining 5% is in cash.

The unaudited Balance Sheet and portfolio summary as at 12 November 2013 is shown on pages 4 and 5.

The Company’s strategy going forward is to maintain a fair proportion of assets in growth businesses, which will predominantly comprise AIM-quoted investments. A larger proportion will be maintained in unquoted investments which are expected to produce a steady yield which will contribute towards funding annual dividends, share buybacks and running costs.

Dividend policy
It is the Board’s intention to pay annual dividends of at least 4% per annum.

Initially the dividends are likely to be paid at the 4% level but where the Company is able to generate significant capital profits, the Board will consider increasing the rate.

In line with this policy, an interim dividend of 2.0p per share will be paid on 28 March 2014 to Shareholders on the register at 14 February 2014.

Share buybacks
The Company intends to operate a policy of buying in its own shares that become available in the market at a 5% discount to NAV (subject to liquidity and any regulatory restrictions).

The Company has appointed Panmure Gordon to act as its corporate broker. The Board believes that this will be helpful in operating the share buyback process and in keeping the quoted spread on the Company’s shares at a reasonable level.

Contact details for Panmure Gordon are on the inside back cover of this report.

New Share offer
Following the merger, the Board believes that the Company is well placed to undertake a new fundraising and is making plans for a launch. The new offer will allow Shareholders and other investors to subscribe for New Ordinary Shares so they will gain exposure to the Company’s existing diverse and reasonably mature portfolio.

The new offer is expected to launch in the near future.

Details will be sent to all existing Shareholders at that time.

Outlook
Having successfully completed the first ever merger of six VCTs, the Company and its Shareholders should now start to reap the benefits of the transaction. The burden of running costs has been significantly reduced for most Shareholders and the new share buyback and dividend policies have been implemented.

Although the Company currently has a reasonable level of cash, new investment activity is likely to be mainly funded from investment realisation proceeds and funds raised under the new share offer. Over the reminder of the year, we expect to see the Manager undertake some rationalisation of the portfolio and seek opportunities to exit from investments that are not considered to be core holdings.

I look forward to updating Shareholders on developments with my report in the Annual Report to 31 March 2014.

Chris Kay
Chairman

POST MERGER UNAUDITED BALANCE SHEET
as at 12 November 2013

12 Nov
2013 ‘000Fixed assetsInvestments71,215Current assetsDebtors444Cash at bank and in hand4,7595,203Creditors: amounts falling due within one year(1,512)Net current assets3,691Net assets74,906Capital and reservesCalled up share capital746Other reserves74,160Equity shareholders’ funds74,906Basic and diluted net asset value per share100.4pNew Ordinary Shares in issue 74,594,798

POST MERGER UNAUDITED SUMMARY OF INVESTMENT PORTFOLIO
as at 12 November 2013

CostValuation% of
portfolio
by value ‘000 ‘000Top twenty five venture capital investments (by value)Accumuli plc*2,5193,2214.2%Cadbury House Holdings Limited 3,2332,7783.7%Mosaic Spa and Health Clubs Limited2,7472,7343.6%Baron House Developments LLP2,6952,6953.5%Ludorum plc*3,4432,5763.4%Inland Homes plc*2,0752,4073.2%Tracsis plc*2,0512,3053.0%Vulcan Renewables Limited2,3002,3003.0%Universe Group plc*1,7052,1842.9%Hoole Hall Country Club Holdings Limited2,3161,9802.6%Science in Sport plc*1,6891,7422.3%Tramps Nightclub Limited1,5821,5452.0%Bowman Care Homes Limited1,5351,5352.0%Hoole Hall Spa and Leisure Club Limited1,4671,3351.8%Plastics Capital plc*8481,3041.7%Leytonstone Pub Limited1,2581,3021.7%Anpario plc*1,2961,2961.7%Blue Cedars Limited1,2671,2671.7%Future Biogas (Reepham Road) Limited1,1231,1231.5%Aminghurst Limited1,1061,1061.5%Quadrate Spa Limited1,0741,0741.4%Residential PV Trading Limited1,0601,0601.4%Domestic Solar Limited1,0081,0081.3%Data Centre Response Limited9839831.3%Pennant International Group plc*9779771.3%43,35743,83757.7%Other venture capital investments 29,43727,37836.0%72,79471,21593.7%Cash at bank and in hand4,7596.3%Total investments75,974100.0%

All venture capital investments are unquoted unless otherwise stated.

* quoted on AIM DOWNING ONE VCT PLC FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013
(PRE MERGER)

UNAUDITED BALANCE SHEET
as at 30 September 2013

30 Sept
201330 Sept
2012 31 Mar
2013 ‘000 ‘000 ‘000Fixed assetsInvestments12,97913,83013,960Current assetsDebtors45109111Cash at bank and in hand673526123718635234Creditors: amounts falling due within one year(132)(155)(189)Net current assets58648045Net assets13,56514,31014,005Capital and reservesCalled up share capital196199196Capital redemption reserve1,1531,2261,153Share premium3156,066315Special reserve13,7438,08513,743Capital reserve – realised2704,0571,136Capital reserve – unrealised(2,125)(5,295)(2,555)Revenue reserve13(28)17Equity shareholders’ funds13,56514,31014,005Basic and diluted net asset value per share69.2p72.0p71.5p

UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2013

Six months ended
30 September 2013Six months ended
30 September 2012Year
ended
31 March
2013RevenueCapitalTotalRevenueCapitalTotalTotal ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000Income155-155141-141329(Losses)/gains on investments- realised-(6)(6)-333333470- unrealised-154154-(852)(852)(598)155148303141(519)(378)201Investment management fees(32)(94)(126)(35)(107)(142)(250)Other expenses(127)-(127)(124)-(124)(239)Return/(loss) on ordinary activities before taxation(4)5450(18)(626)(644)(288)Taxation——-Return/(loss) attributable to equity shareholders(4)5450(18)(626)(644)(288)Basic and diluted return/(loss) per share 0.3p0.3p(0.1p)(3.1p)(3.2p)(1.5p)

The total column within the Income Statement represents the profit and loss account of the Company. All Revenue and Capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement as noted above.

Other than revaluation movements arising on investments held at fair value through the Income Statement, there were no differences between the return/(loss) as stated above and at historical cost.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the six months ended 30 September 2013

30 Sept 201330 Sept 201231 Mar 2013 ‘000 ‘000 ‘000Opening Shareholders’ funds14,00515,81215,812Issue of shares-393393Unallotted shares-(382)(382)Issue of shares under Share Realisation and Reinvestment Programme -5,8505,850Share issue costs-(99)(97)Purchase of own shares-(242)(413)Purchase of own shares under Share Realisation and Reinvestment Programme -(5,879)(5,879)Total recognised gains/(losses) for the period50(644)(288)Dividends paid (490)(499)(991)Closing Shareholders’ funds13,56514,31014,005

UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 September 2013

30 Sept
201330 Sept
201231 Mar
2013 ‘000 ‘000 ‘000Net cash outflow from operating activities and returns on investments(58)(86)(119)

Capital expenditure

Purchase of investments

(724)(1,883)(2,188)

Disposal of investments

1,8522,1522,719Net cash inflow from capital expenditure1,128269531

Equity dividends paid

(484)(499)(989)

Net cash inflow/(outflow) before financing

586(316)(577)

Financing

Proceeds from new share issue-393393Proceeds from new share issue under Share Realisation and Reinvestment Programme-5,8505,850Unalloted share issue proceeds-(382)(382)Share issue costs 2(99)(99)Purchase of own shares (38)(325)(467)Purchase of own shares under Share Realisation and Reinvestment Programme -(5,879)(5,879)Net cash outflow from financing (36)(442)(584)Increase/(decrease) in cash550(758)(1,161)

SUMMARY OF INVESTMENT PORTFOLIO
as at 30 September 2013

CostValuationValuation
movement
in period% of
portfolio
by value ‘000 ‘000 ‘000Top ten venture capital investments (by value)Cadbury House Holdings Limited 2,3691,914-14.0%Hoole Hall Country Club Holdings Limited 1,9201,584-11.6%Ludorum plc *2,0681,201408.8%Hoole Hall Spa and Leisure Limited 1,2001,068-7.8%Accumuli plc*3387361595.4%Vulcan Renewables Limited 700700-5.1%First Care Limited942668-4.9%Plastics Capital plc*1666221724.6%Inland Homes plc*3905851954.3%Universe Group plc *293563784.1%10,3869,64164470.6%Other venture capital investments 4,7183,338(490)24.5%15,10412,97915495.1%Cash at bank and in hand6734.9%Total investments13,652100.0%

All venture capital investments are unquoted unless otherwise stated.

* quoted on AIM

SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 30 September 2013 Additions

‘000Inland Homes plc390Science in Sport plc333Other sundry investments1724
DisposalsCostValue at
31/03/13*Disposal
proceeds(Loss)/gain
against
costRealised
(loss)/gain
in period ‘000 ‘000 ‘000 ‘000 ‘000Quoted (market sales)Animalcare Group plc2192222361714Belgravium Technologies plc433445211Craneware plc2933263029(24)Netcall plc5518721015523Travelzest plc96173(93)(14)Tristel plc511193179(332)(14)Unquoted (including loan note redemptions)Baron House Developments LLP115115115–Cadbury House Holdings Limited149149149–Real Time Logistics Solutions Limited-125125125-Tender offerHasgrove plc951331566123BondsUlster Bank (IRE) 11.75% Subord558357332(226)(25)2,1341,8581,852(282)(6)

* adjusted for purchases in the period NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
for the six months ended 30 September 2013

1. The unaudited half-yearly financial results cover the six months to 30 September 2013 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 March 2013, which were prepared under UK Generally Accepted Accounting Practice and in accordance with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” January 2009.

2. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

3. The comparative figures were in respect of the six months ended 30 September 2012 and the year ended 31 March 2013 respectively.

4.

Return per share

Weighted average
number of shares in issueRevenue
(loss)/returnCapital
gain/(loss) ‘000 ‘000Period ended 30 September 201319,592,490(4)54Period ended 30 September 201220,160,488(18)(626)Year ended 31 March 201319,958,55827(315)

5. Dividends paid in the period

Six months ended
30 September 2013Year ended
31 March
2013RevenueCapitalTotalTotal ‘000 ‘000 ‘000 ‘000Date paid2013 Final30/09/2013: 2.5p-490490-2013 Interim28/03/2013: 2.5p—4922012 Final 28/09/2012: 2.5p—499-490490991

6. Basic and diluted net asset value per share

Shares in issueNet assetsNAV per
share ‘000pencePeriod ended 30 September 201319,592,49013,56569.2Period ended 30 September 201219,872,99014,31072.0Year ended 31 March 201319,592,49014,00571.5

7.

Called up share capital

Shares in issue ‘000Period ended 30 September 201319,592,490196Period ended 30 September 201219,872,990199Year ended 31 March 201319,592,490196

8. Reserves

Capital
redemption
reserveShare
premiumSpecial
reserveCapital
reserve
-realisedCapital
reserve
-unrealisedRevenue
reserve ‘000 ‘000 ‘000 ‘000 ‘000 ‘000At 1 April 20131,15331513,7431,136(2,555)17Capital expenses—(94)–Gains/(losses) on investments—(6)154-Realisation of revaluations from previous years—(276)276-Dividends paid—(490)–Retained net revenue —–(4)At 30 September 20131,15331513,743270(2,125)13

The Special reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay dividends/capital distributions.

Distributable reserves are calculated as follows:

30 Sept
201331 Mar
2013 ‘000 ‘000Special reserve13,74313,743Capital reserve – realised2701,136Revenue reserve1317Unrealised losses (excluding unrealised unquoted gains)(2,179)(2,765)Total distributable reserves11,84712,131

9. Reconciliation of return on ordinary activities before taxation to net cash flow from operating activities

30 Sept
201330 Sept
201231 Mar
2013 ‘000 ‘000 ‘000Return/(loss) on ordinary activities before taxation50(644)(288)(Gains)/losses on investments(148)519128Decrease in other debtors596360Decrease in other creditors(19)(24)(19)Net cash outflow from operating activities(58)(86)(119)

10.

Reconciliation of net cash flow to movement in net funds

30 Sept
201330 Sept
201231 Mar
2013 ‘000 ‘000 ‘000Beginning of period1231,2841,284Net cash inflow/(outflow)550(758)(1,161)End of period673526123

11. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 March 2013 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor’s report on those financial statements was unqualified.

12. Going concern
The Directors have reviewed the Company’s financial resources at the period end and concluded that the Company is well placed to manage its business risks.

The Directors confirm that they are satisfied that the Company has adequate resources to continue to operate for the foreseeable future.

For this reason, the Directors believe that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.

13. Risks and uncertainties
Under the Disclosure and Transparency Rules, the Board is required, in the Company’s half-year results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks are:

(i) compliance risk of failure to maintain approval as a VCT; and
(ii) investment risk associated with investing in small and immature businesses.

The Company’s compliance with the VCT regulations is continually monitored by the Manager, who regularly reports to the Board on the current position. The Company also retains PricewaterhouseCoopers LLP to provide regular reviews and advice in this area.

In order to make VCT qualifying investments, the Company has to invest in small businesses which are often immature.

It also has a limited period in which it must invest the majority of its funds into VCT qualifying investments. The Manager follows a rigorous process in vetting and careful structuring of new investments, including taking a charge over the assets of the business wherever possible and, after an investment is made, closely monitoring the business.

The Board is satisfied that these approaches provide satisfactory management of the key risks.

14. The Directors confirm that, to the best of their knowledge, the half yearly financial report has been prepared in accordance with the “Statement: Half-Yearly Financial Reports” issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

15. Copies of the unaudited half-yearly financial results will be sent to Shareholders shortly. Further copies can be obtained from the Company’s Registered Office and will be available for download from www.downing.co.uk.


This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Downing ONE VCT plc via Globenewswire

HUG#1746815

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